# name: handling-cross-border-taxation description: Guides US-Canada cross-border personal tax situations — residency determination, treaty tie-breakers, foreign tax credits, dual filing for US citizens in Canada, FBAR and Form 8938 reporting, TFSA/RRSP treatment, and snowbird rules. Use when the user asks about working, moving, or living across the US-Canada border, dual citizenship taxes, tax residency in two countries, double taxation, FBAR, the substantial presence test, or whether a TFSA or RRSP is taxed by the IRS. Do not use for single-country returns (preparing-us-personal-tax-returns, preparing-canadian-personal-tax-returns) or for corporate cross-border structuring.

# Handling US-Canada Cross-Border Taxation

# When to use / when NOT to use

• Use for: determining which country can tax whom, sequencing dual filings, foreign tax credits, US information reporting (FBAR/8938), registered-account treatment across the border, snowbirds and remote workers.
• Do NOT use for: preparing either country's return mechanics (use the preparing-* skills once obligations are established), corporate structuring, immigration advice, or third-country situations.

# Important limits

• Educational guidance, not professional tax advice — cross-border is the highest-referral area: renunciation, departure tax, PFIC holdings, and treaty elections go to a cross-border CPA/EA.
• All figures are stated for tax year 2026 and MUST be verified against irs.gov and canada.ca before use.
• Never assist with evasion — hiding accounts or income from either tax authority is out of scope; disclosure programs (IRS Streamlined, CRA Voluntary Disclosures) are the legal path for past non-compliance.

# Workflow

1. Determine residency first — everything follows from it.
   • US: citizen or green-card holder → US tax resident regardless of location (citizenship-based taxation). Otherwise apply the substantial presence test: days this year + ⅓ last year + ⅙ year before ≥ 183 (and ≥ 31 days this year).
   • Canada: facts-and-circumstances residential ties — home, spouse/dependants in Canada are primary; secondary ties (accounts, licences, health card) accumulate.
2. If resident of both, apply the treaty tie-breaker in strict order: permanent home → centre of vital interests → habitual abode → citizenship → competent authority.
3. Establish the filing set: US citizens/green-card holders in Canada file both every year (1040 + T1). Treaty non-residents may still owe source-country filings (e.g., 1040-NR for US-source income).
4. Eliminate double tax with foreign tax credits, claimed in the residence country, per income category — compute the source-country return first, then credit those taxes on the residence return.
5. Screen US information reporting: FBAR (FinCEN 114) if aggregate non-US accounts exceeded $10,000 at any moment; Form 8938 at its higher thresholds; Form 3520/3520-A risk for TFSA/FHSA/RESP.
6. Screen Canadian side: T1135 for foreign property over $100,000 cost; departure/arrival year rules (deemed disposition on emigration).
7. Validate: residency conclusion documented with the facts used; every income item appears on the correct return(s); FTC claimed only in the residence country; all information forms listed with their deadlines; anything involving PFICs, departure tax, or renunciation flagged for a professional.

# Current figures (tax year 2026 — verify before use)

# Registered accounts across the border (flag loudly)

• RRSP/RRIF: treaty-recognized — US tax deferred; still reportable on FBAR/8938.
• TFSA/FHSA: NOT treaty-protected — income is taxable currently on the US return, with possible Form 3520/3520-A trust filings. A US person holding a TFSA is usually a mistake; raise it immediately.
• Canadian mutual funds/ETFs held by US persons: PFIC regime — punitive; refer to a professional.
• 401(k)/IRA for Canadian residents: treaty-deferred in Canada; withdrawals sourced to the US with withholding.

# Edge cases & failure modes

• Snowbirds near 183 weighted days → Form 8840 closer-connection statement, filed on time, every year.
• Remote worker in Canada for a US employer → likely Canadian-resident: T1 on worldwide income, US obligations depend on citizenship/source; watch payroll-withholding mismatch.
• Departure from Canada → deemed disposition (departure tax) on most property; date-of-departure return; refer out if large unrealized gains.
• Past non-compliance discovered → IRS Streamlined Foreign Offshore / CRA Voluntary Disclosures — never advise silent catch-up filing.

# References

Treaty tie-breaker detail, filing matrices by profile, FTC mechanics, and reporting-form table: see references/reference.md.